Professional Documents
Culture Documents
BROADBAND KOREA:
INTERNET CASE STUDY
March 2003
This report was prepared by Tim Kelly, Vanessa Gray and Michael Minges. It is based
on research carried out from 23 to 30 May 2002 as well as articles and reports noted
in the document. The assistance of the Ministry of Information and Communication,
particularly Sang-Hak Lee, was indispensable and highly appreciated. The assistance
of colleagues within ITU is also noted particularly Nathalie Delmas, who formatted the
report and created the cover. Both Jin-Kyu Jeong and Chinyong Chong provided detailed
comments.
The report would not have been possible without the cooperation of the many Korean
organizations who offered their time to the report’s authors. The report is one of a
series examining the Internet in developing nations. Additional information is available
on ITU’s Internet Case Study web page at http://www.itu.int/ITU-D/ict/cs/.
The report may not necessarily reflect the opinions of ITU, its members or the
Government of the Republic of Korea.
© ITU 2003
ii
Contents
5. Conclusion ......................................................................... 63
5.1 State of the Internet .................................................................. 63
5.2 Lies, Damned Lies and Statistics ................................................. 64
5.3 Learning from Korea .................................................................. 65
iii
Figures
Tables
iv
Boxes
v
1. From rags to riches in ICT
Fixed line telephone subscribers per Internet users per 100 inhabitants
Korea (Rep.) 55
Korea (Rep.) 21.3
1
Korea Internet Case Study
Gross Tertiary
National Population students
Income Land per 100
per capita, area Total Density School inhab- Second
US$, (km2, (000s) Per % enrol- itants -ary+
2001 000s) 2001 km2 Urban Literacy -ment d) c)
Note: a) Data for Taiwan, China from Bureau of Statistics. b) Mid-year. c) Per cent of adult population with
at least a secondary education. d) 1995 or latest year available.
Source: National statistics (Population, Secondary+), World Bank (GNI, land area, urban population), UNDP
(literacy, school enrolment), UNESCO (Tertiary students).
2
1. From rags to riches in ICT
Korea’s high rate of literacy and school the ICT industry in the Korean
enrolment are essential prerequisites economy was 13 per cent in 2000, up
for the widespread adoption of ICTs. from 8.6 per cent in 1997 and the
These factors have helped contribute highest among the Organization of
to the growing impact of ICT in Korean Economic Cooperation and
economy and society. Development (OECD) countries.2
3
Korea Internet Case Study
1
Korean Educational Development Institute. Let’s Learn about Korea. Seoul, 2002.
2
The OECD rankings are based on older data but it is unlikely that Korea’s position would have changed much.
See OECD. Measuring the ICT Sector. http://www.oecd.org/pdf/M00002000/M00002651.pdf.
3
Samsung had the world’s fastest growing brand image in 2001. See “The Best Global Brands.”
BusinessWeek. 5 August 2002. www.businessweek.com/magazine/content/02_31/b3794032.htm.
4
Samsung is the fourth largest ADSL manufacturer in the world. See Samsung. “Samsung is one of the world-
leading ADSL vendors.” Press Release. 9 February 2001.
4
2. ICT market
2. ICT market
5
Korea Internet Case Study
There are around a dozen developing economies technology because of the investment already made
that have graduated to the ranks of the universally in analogue telephone switches in cities. The
served: 90 per cent or greater of households with government also pushed the development of a
a telephone. How did they succeed in achieving locally produced telephone exchange—the TDX—
universal service? The composition of the group to reduce dependency on foreign imports and
tends to reinforce the importance of wealth as well alleviate capacity limitations.
as highlight the advantage that small countries
have. All are high-income economies with GNP per Tariffs were modified to enhance accessibility. The
capita in the range of US$ 11’450 to US$ 23’790. number of local call areas was reduced from about
Hong Kong, China, for example, has a higher 1’600 to about 150 and a national flat-rate usage
GNP per capita than the United Kingdom. Several tariff became a policy goal. Installation charges were
are oil-rich states (Brunei, Kuwait, Qatar, United standardized and used to reduce the gap within
Arab Emirates) and most are relatively small the country by raising urban installation charges
(Bahrain; Cyprus; Hong Kong, China; Macao, China; and lowering rural ones.
Malta, and Singapore).
Money for telecommunication investment was raised
Of these developing countries, the Republic of Korea from several sources. Various laws were established
stands out. It has the largest land area of any to raise funds from bonds. Tariffs were structured
country in the group and has developed its economy to maximize investment funding. Telecommu-
without the benefit of natural resources such as nications was given priority in the Fifth Five-Year
oil. Until the 1960s, telephone services were mainly Socio-Economic Development Program (1982–86),
used for political and military purposes. The rising from less than three per cent of total national
country’s rapid economic growth and consequent investment in the 1970s up to seven per cent in
rise in living standards led to a surge in demand the 1980s.
for telephone service in the 1970s. Waiting lists
grew and the backlog emerged as a social problem. Because of these policies, the country achieved
rapid telecommunication growth through the 1980s.
As a result, upgrading the telecommunication Household telephone penetration increased from
network became a priority and a one-phone, one- 21 per cent in 1980 to 90 per cent by 1990.
family policy was pursued. Korea Telecom was Domestic and international pressure to open the
separated from the Ministry of Communications in telecommunication market began to grow in the
1982 to give it more flexibility to eradicate the 1990s. As in many developed countries, a high level
waiting list. Investment was directed to rural areas of universal service has allowed the Republic of
to minimize disparities with urban regions. Rural Korea to progressively liberalize its
areas were also targeted for the latest digital telecommunication market.
Box Figure 2.1: The way to universal service in the Republic of Korea
Waiting list, percentage of households with telephone and telecom investment,
US$ billion, Republic of Korea
Note: In the right chart, GFCF refers to Gross Fixed Capital Formation.
Source: ITU World Telecommunication Indicators Database.
6
2. ICT market
7
Korea Internet Case Study
Source: KT.
8
2. ICT market
Subscribers to “relay” cable television 7.0 million 2001 Source: Korean Broadcasting
-As % of total households 43% Comission.
9
Korea Internet Case Study
10
2. ICT market
Source: KRNIC.
Korea is an exception to the argument that limited budding dot-com went public with an offering on
English fluency or non-Latin character alphabets the Korean venture capital stock exchange
are barriers to Internet access. The development (KOSDAQ). The number of its users grew from
of Korean content has been astounding and today 5.7 million at the end of 1999 to 19.6 million at
the nation has one of the highest usage ratios of the end of 2002. Some 90 per cent of all Korean
home grown content. The top 10 web sites accessed Internet users log onto Daum, ranking it first.
by Korean users are all in Korean. The number of Around 450 million pages of Daum’s content is
domains registered using .KR—almost exclusively viewed on an average day. Daum ranks tops in
in the Korean language—ranks the nation fifth in pages per user and session time in the world. Daum
the world.6 Not only has this driven use, but it has is really not much different than other portals except
also reduced the need for expensive international that its business model works. It offers familiar
circuits. It also suggests that in many ways the portal content: e-mail, instant messaging, news,
Internet in Korea is actually one big Intranet with information, shopping, music, videos, etc and
most users preferring to access local sites. makes money from advertising, e-commerce
transactions and members-only portions of its site.
Korea’s top web site is Daum, a start-up company But what allows it to earn money is that it is Korean.
founded in 1995. In 1997, it began operating a Few Koreans surf abroad because of the lack of
web-based email service filling a void created by Korean content and lack of ease with English. So
the slowness of Korea’s proprietary online services Daum has just been better than other Korean
to provide Internet-based content. In 1999, this portals in attracting customers.
11
Korea Internet Case Study
43 per cent of the Republic of Korea’s households loop unbundling was not implemented. Hanaro also
had a broadband Internet connection at March faced barriers that discouraged KT customers from
2002, the highest ratio in the world. Korea’s high switching network providers. This included no
broadband penetration can be attributed to the number portability and users having to pay a higher
following factors: connection and subscription charge if they switched
to Hanaro and later reconnected to Korea Telecom.
Geography. 80 per cent of Korea’s population lives One way for Hanaro to break into the market was
in urban areas. Though this figure is not as high as to offer a broadband Internet access service. This
island economies such as Hong Kong, China or exploited KT’s unwillingness to enter the ADSL
Singapore, Korea’s urban geography is dense, market due to its large investment in ISDN. Faced
simplifying broadband access.3 Apartments account with a declining market share, KT entered the ADSL
for 48 per cent of Korea’s housing stock and provide market in June 1999. At October 2001, there were
dwelling for 40 per cent of its population. Another seven companies providing broadband Internet
factor is the proximity of telephone exchanges. The access service. Competition among broadband
average distance of a customer from a telephone technologies has also grown the market through
exchange is 2.2 kilometres, with 95 per cent of greater choice and lower pricing. ADSL is readily
customers within four kilometres, the target range available to the 90 per cent of Korean households
of ADSL. with a fixed telephone line. Some 57 per cent of
Korean homes are passed by cable television,
Competition. Consumer broadband access in Korea providing them with another broadband option
began in July 1998 with the launch of cable modem through cable modem. In addition, there are other
service by Thrunet. The introduction of local loop broadband options such as Local Area Networks
competition with the entry of Hanaro Telecom in (LAN), broadband Wireless Local Loop (WLL) and
April 1999 further fuelled the broadband market. satellite-delivered solutions. As a result of both
With most Koreans already subscribing to market and technological competition, prices are
incumbent Korea Telecom, the market was saturated among the lowest in the world (see right chart
for traditional telephone service. In addition, local below).
SingTel
111
Korea 43% (Singapore)
Telstra
(Australia)
53
Hong Kong,
36% BellSouth
China 50
(USA)
Taiwan, BT (UK) 41
31%
China Monthly ADSL
PCCW (HK,
38 subscription
Ch.)
Singapore 20% Percentage of charge, 2002,
Telecom (N.
households with Zeal.)
34 US$
Government support. The government has A growing number of subscribers created economies
facilitated broadband development through an early of scale, which also reduced equipment prices. KT’s
commitment to high-speed infrastructure with specific ADSL equipment purchase cost per line dropped
programs. This has included a positive and supportive from US$ 574 in 1999 to US$ 132 in 2001.5
relationship with the private sector, low interest loans
and a certification program for apartment complexes Mentality. Though more difficult to measure, it is
with high-speed access (for more detail on the widely agreed that Korean “mentality” is also a key
government’s support see Box 3.1). factor. Many Korean Internet users first got a taste
of high-speed access at Internet cafés (so-called
Equipment. Korea’s manufacturing industry has “PC bangs”) and subsequently wanted the same
been an advantage with local suppliers eager to rapidity at home. There is also a “copy-cat”
get into the ADSL market. 4 This has minimized syndrome; once one person gets something
shortages and helped keep equipment prices low. everyone else wants it, too.
12
2. ICT market
6’743
Korea's international Internet
bandwidth (Mbps)
2’623
661
3 3 20 116 202
a n d d o m e s t i c t ra f f i c b e t w e e n Ko r e a h a s a m o n g t h e l o w e s t
different ISPs was routed abroad. broadband Internet prices in the
The National Computerization world. Broadband pricing is flat rate
Agency led the drive to establish a and compared to other countries, the
public exchange, the Korean Internet bandwidth on offer is above average.
Exchange (KIX) in 1995.6 However, Broadband pricing is uniform across
traffic soon exceeded capacity. This providers in Korea. Most packages
led to the Korean Internet Neutral are around US$ 30 per month. The
Exchange (KINX) in June 1999. In variations depend on the amount of
addition, Korea Telecom and Dacom bandwidth. One plan offered by
have established exchanges, KTIX Thrunet proposes users a lower price
a n d D I X r e s p e c t i v e l y. A l l f o u r (US$ 26 per month) in exchange for
exchanges are inter-connected (see receiving e-mail advertisements.
Figure 2.5, left) and most ISPs
connect with each other through the Dial-up Internet prices are not so
exchanges rather than private r e l e va n t c o n s i d e r i n g t h a t m o s t
peering arrangements. subscribers now use broadband. One
important motive for switching to
Korea’s international Internet flat-rate broadband is to avoid the
connectivity has expanded local telephone charge imminent
tremendously and stood at 5.2 Gbps with dial-up subscriptions. A dial-up
at December 2001 (Figure 2.5, right). Internet subscriber must pay local
It has benefited from its proximity to t e l e p h o n e c h a r g e s o f 3 9 Wo n
the sea and hence fibre-optic (3 US cents) per unit (three minutes
submarine cables (it is connected to during peak times and 4.3 minutes
around ten different systems). in off-peak periods). By contrast, an
entry plan ADSL subscription costs
2.3.3 Pricing 30’000 Won (US$ 22.84). After
30 hours of monthly use, it is
The most relevant data to use for cheaper to switch from dial-up to
comparing Korea’s Internet pricing broadband access in Korea. With the
are rates for broadband access (e.g., a v e r a g e Ko r e a n I n t e r n e t u s e r
DSL and cable modem) since the logging on for some 40 hours a
majority of Koreans connect to the month, it is no surprise that so many
Internet in this way. In that regard, have switched to broadband access.7
13
Korea Internet Case Study
Source: KRNIC.
14
2. ICT market
15
Korea Internet Case Study
Penetration rate of fixed and mobile, Mobile evolution in Korea (cellular density)
per 100 inhabitants 70
70 Jan 2002: SK Telecom
60 merges with Shinsegi
60
50 Jan 1996:
50 Fixed telephone lines May 2001:
40 commercial
40 KTF created
CDMA service
30 thru merger
30 Mobile start
overtakes 20
20 1994: KMTC Dec 2000: IMT-
Mobile cellular fixed in Oct.
10 sold to SK 2000 licences
10 subscribers 98 Group awarded
0 0
1990 1992 1994 1996 1998 2000 2002 1990 1992 1994 1996 1998 2000 2002
Source: ITU World Telecommunication Indicators Database and case study research.
16
2. ICT market
SK Telecom was the first in the world Like its rival, SK Telecom, KTF has its
to offer mobile data services over its roots in Korea Telecom, which owns a
standard CDMA network (IS-95). In 40 per cent stake. This came about
October 2000, it launched its through KT FreeTel, which merged
CDMA2000 1x service, under the with M.Com (now KTM.Com) in May
brand name Nate, and in 2001. KTF has a CDMA licence to
January 2002 it commercialized its operate in the 1’800 MHz band.
CDMA2000 1x EV-DO (1x Evolution,
data optimized) service. As of KTF claims that it was the first to
December 2002, it had 14.8 million introduce segmented marketing to the
wireless Internet-enabled handsets in Korean market. Among the different
use and 8.4 million regular Nate users segments it identifies and targets are:
(defined as using the service at least up to age 13 (Kid’s market); 13-
once a month). 18 year-olds (Bigi); 18-25 year-olds
(Na); 25-35 year olds (Main); older
2.4.1.2 KTF age groups (silver market); women
KTF <www.ktf.co.kr> is the second (Drama) and corporate sector (Viz).
largest mobile network operator with Average Revenue Per User (ARPU) is
a 32 per cent market share in highest in the “Main” group, but
December 2002 and a turnover of mobile Internet usage is highest
Won 4.49 trillion (US$ 3.7 billion). among the Na and Bigi groups.
Selected links between fixed-line, mobile and IMT-2000 operators in the Korean market, May 2002
Fixed-line
SK Group, a major Other KT (Korea Telecom), LG Group, major telecom operators
chaebol with diverse corporate incumbent fixed-line operator equipment manufacturer and
interests investors with 97% market share in basic chaebol
Retains 26.6%
Owns voice services & 49% in BT, UK
Controlling interest, ownership
7% broadband incumbent
acquired since 1994 Other operator
KT and SKT each own DACOM, corporate
Hanaro, Acquired ownership stake
around 11% of each int’l carrier investors
broadband carrier (now 21.7% ) in 1998
other
Owns
40% stake
SK Telecom KTF LG Telecom
Note: Only selected ownership links are shown and these are subject to change.
Source: ITU Korea case study research.
17
Korea Internet Case Study
18
2. ICT market
The mobile world is currently moving from second already available for CDMA2000 1x whereas
generation (2G) standards to a 2.5G world —with colour handsets for GPRS are still a rarity.
many competing standards— to a third generation
(3G) world in which the IMT-2000 family of A second difficulty is to interpret where CDMA2000
standards will provide for higher data speeds. 1x EV-DO (1x evolution, data optimised) fits in. On
the basis of speed (up to 2.4 Mbit/s), it is
For CDMA technologies, the 2G is known as comparable with other 3G IMT-2000 standards, such
cdmaOne (or IS-95A) and 2.5G is known as IS- as W-CDMA. However, 1x EV-DO still uses
95B. Third generation or IMT-2000 is known as essentially the same circuit-switched technology as
CDMA2000 1x (as shown below) with its evolved ordinary CDMA subscribers (SK Telecom estimates
technologies EV-DO and EV-DV.11 Different brands that only an extra US$ 20 per subscriber is needed
of CDMA2000 1x use different browsers and, in to move from CDMA2000 1x to 1x EV-DO) whereas
practice, are able to offer more than WAP/GPRS, a separate 3G network would need to be constructed
b o t h i n t e r m s o f s p e e d a n d f u n c t i o n a l i ty. at substantial additional cost.
CDMA2000 1x offers a top speed of some
144 kbit/s whereas GPRS only goes as high as The main advantage of 1x EV-DO is that it is available
115 kbit/s (in practice, neither technology has now and is a logical evolution from products already
achieved the full capacity under operational available on the market. However, the initial signs
conditions). Also, there are many colour handsets are that take-up has been slow, compared to 1x.12
EDGE W-CDMA
GSM GPRS
2G 2.5G 3G
subscribers with a colour handset, the those with colour capability use data
level is higher still, at around facilities (see Figure 2.10). It appears
Won 7’000 (US$ 5.40) per month. that the introduction of colour
Furthermore, whereas only around handsets, which occurred after
one third of ordinary 2G handsets are September 2001, has been a major
used for SMS, some four-fifths of factor in increasing the level of mobile
19
Korea Internet Case Study
SK Telecom's revenue from mobile data, as a percentage of total data (Jan 2001 - March 2002)
and by type of handset, March 2002 (in Won)
Mobile data revenue, per handset-type (Won) Mobile data revenue, as % of total revenue
8’000 8
% of users with 80% Introduction of
7’000 7
handset using colour handsets
6’000 mobile data 66% 6
5’000 services 5
4’000 4
47%
3
3’000 32%
2
2’000
1
1’000
0
0
Jan Mar May Jul Sep Nov Jan Mar
2G SMS 2G WAP 2.5G WAP 2.5G Colour 2000 2001
20
2. ICT market
The Korean mobile market is different from that The current market prices range:
of Europe in several ways. For instance, there
are few prepaid users, operators use a CDMA • between US$ 250 - 500 for full-colour
platform but with calling party pays rather than CDMA2000 1x handsets;
receiving party pays, and ring tones are positively
symphonic in comparison to those tinny jingles • between US$ 200 – 250 for black & white
heard in Europe. Another way in which Korea is CDMA2000 1x handsets;
different is that the revenue the country derives
from equipment sales is far higher than that from • between US$ 500 – 650 for EV-DO handsets.
services sales. In 2000, for instance, info-
communication equipment production in Korea Despite these relatively high prices, technophile
amounted to US$ 67 billion compared with Koreans trade-up their handsets quite often with
services sales of just US$ 22 billion. A high colour driving the market. The price of a colour
proportion of this comes from production, sales screen, with high-speed Internet access, is shorter
and exports of mobile terminals (see 2.4.4). This battery life. It is common, in Korea, to see mobile
puts the equipment manufacturers, like LG, battery re-charging stations in supermarkets,
Samsung, Daewoo or Hyundai, in a very strong garages and other public places because of the
position. heavy usage of voice and data applications. As the
rest of the world catches up with Korea, this is one
Between 1996 and mid 1999, mobile handsets were area where Korean manufacturers already have a
subsidised by some 4.9 trillion Won (US$ 4 billion) head start.
by service providers. However, since June 2000,
handset subsidies have been officially banned in Since the ban on handset subsidies, the major
Korea. During that month, handset sales fell to a manufacturers and the shift towards CDMA2000 1x,
quarter of their former level, though they have the combined market share of the leading
subsequently picked up again. Most other countries companies, Samsung and LG, has risen from around
either allow subsidies, or the problem does not arise two thirds to three-quarters of all sales in the
because competition in the services market is domestic market. Exports have also become more
insufficient to warrant subsidies. The fact that important, reaching an expected US$ eight billion
subsidies are explicitly banned gives Korea’s mobile in 2002, which compensates for the fall in domestic
industry a convenient excuse of explaining high market sales. Imports remain minimal with sales
handset prices to consumers (i.e., blaming MIC). of just US$ 54 million expected in 2002.
10’000 Exports
8’000
6’000
4’000
2’000
0
1998 1999 2000 2001 2002
Source: Left chart: KISDI IT Outlook for Korea, 2002. Right photo: Michael Minges.
21
Korea Internet Case Study
Data from SK Telecom on average revenue per user (ARPU) by age group and breakdown of content use
Note: "Other" content, in right chart, includes news/sports (2.0%), e-books/education (0.6%) and e-
lottery/shopping (0.3%).
Source: SK Telecom.
22
2. ICT market
Internet users carried out by KRNIC charged at 6.5 Won per packet
showed a relatively low level of (97 kb for US$ one); Multimedia
satisfaction with the price of the messages, charged at 2.5 Won
service.14 Some 17 per cent of non- per packet (250 kb per US$ one);
mobile Internet users quoted high and audio/video on demand,
prices as the reason they were not charged at 1.25 Won per packet
using the service. 15 There are four (0.5 Mb per US$ one), a price re-
main elements to pricing data on a duction of 50 per cent that was
mobile platform: approved by the MIC on
May 29 2002.
• The cost of subscription. Unlike
NTT DoCoMo’s service in Japan, The current signs are that the price is
Korean operators do not charge not yet quite right and continue to be
a subscription price for mobile adjusted. The most popular mobile
data. data applications are those that can
be downloaded (e.g., ring tones and
• The cost for the volume of data games) and played offline rather than
downloaded, normally measured those that require the user to be online
by packets of 512 bytes each. or the handset to be “always-on”.
• The cost of the content, which is Korean mobile operators are using a
related to its perceived value and business model which is very similar
timeliness. to that used by NTT DoCoMo in Japan,
but without the subscription price for
In an era where technology transition, data services. They are mainly offering
from low to high-speed services, is a “walled garden” type content model
significant, service providers must with revenues split between content
walk a fine line between pricing new provider and services provider in the
services too cheaply (and risk ration 90:10. KTF has more than
undercutting older, better established 130 content providers and SK Telecom
low speed data services) and pricing more than 250. In theory, the content
them too expensively (and stifling the providers should get 90 per cent of
market). Operators have thus tried to any revenue raised from the sale of
differentiate their service offerings by content (a lower figure is applied for
platform and by message type: streaming TV content). But in practice,
the majority of revenues (around
• Platform: SK Telecom, for in- 70 per cent) come from airtime (per
stance, recognizes five main plat- minute prices paid for using the mobile
forms for its NATE mobile data phone). The operator retains all of this
service: mobile handsets, PCs, revenue.
PDAs (personal digital assist-
ants), vehicle-mounted terminals 2.4.3 Applications
and interactive televisions. For The major applications in use for
each platform, the philosophy is mobile data are those shown in
based on traffic causation, so Figure 2.11, right chart and in
that PC service is designed for Figure 2.12. To a large extent this
sending and receiving messages usage pattern reflects the legacy of
from mobile phones while the ve- slow-speed mobile Internet access
hicle-mounted service (Nate rather than any true 3G mobile
drive) is intended as an online Internet usage. Carriers interviewed
service, getting data updates during the research programme
constantly from the network, admitted they were finding it hard to
rather than as a standalone serv- persuade users to start paying for
ice using a CD-ROM, for instance. content. This is especially a problem
in Korea, where the vast majority of
• Message type: Currently, Ko- actual and potential mobile data users
rean operators recognize three probably already have an “always-on”
different message types for pur- broadband connection at home, for
poses of pricing: Text messages, which they play a flat-fee for usage.
23
Korea Internet Case Study
24
2. ICT market
Figure 2.12: The top five most popular mobile data services on KTF's 2G and 1x services
May 2002
Source: KTF.
25
Korea Internet Case Study
26
2. ICT market
Mobile data usage in Korea, compared with selected other economies (left) and over time (right)
27
Korea Internet Case Study
28
2. ICT market
1
Korea’s low rate of local lines connected to digital exchanges is partly a result of country’s drive to produce
its own local telephone exchanges known as TDX. Though a large number of the TDX exchanges were
installed during the 1980s, installation has tapered off lately. According to one researcher this is due to the
high development costs which make the exchange more expensive than those produced in other countries.
See Sung-Bum Hong, “The Patterns and the Directions of Technological Innovation in the Switchboard
Industry of Korea.”
2
See Thrunet. “Fact Book.” english.thrunet.com/ir/fact_book.asp.
3
The urbanization of Korea has progressed rapidly since the 1980s and the construction of apartments has
boomed since 1995. In the year 2000, apartments emerged as the main housing unit.
4
Korea’s manufacturers are beginning to have an impact on global ADSL markets. For example, Samsung has
emerged as the fourth and third largest vendor globally for ADSL exchange and customer equipment
respectively. See “Samsung is one of the world-leading ADSL vendors.” Samsung Electronics Press Release.
9 February 2001.
http://www.samsungelectronics.com/network/broadband_network/product_news/news02_09_fed.html.
http://www.samsungelectronics.com/news/telecommunications/com_news_1013075527859_001500.html.
5
MIC. Broadband Internet in Korea. April 2002.
6
For more on the development of Internet exchanges in Korea see, Young-Ro Lee and Byeong-Nam Yoon.
“IXs in Korea.” www.apia.org/nl8/IXKorea.html.
7
“In addition, Internet users in Korea pursuant to traditional dial-up services must pay local per minute
telephony charges, whereas ADSL subscribers pay a flat fee. Therefore, we believe that subscribers that
average over two hours a day on the Internet realize cost savings through our ADSL services.” Hanaro
Telecom. Annual Report on Form 20-F 2001.
8
GSM (Global System for Mobile Communications) is widely used throughout Europe, Africa and Asia and was
first introduced in July 1991. CDMA (Code Division Multiple Access) is a more recent technology, which is
used in some parts of the Americas and in Korea. It is now being introduced in some parts of Asia. For more
details on different mobile technologies, see, ITU Internet Reports 2002: Internet for a Mobile Generation,
available at: www.itu.int/mobileinternet.
9
As the level of prepaid subscribers in Korea is very low compared with other countries, it can be assumed
that this represents the real number of subscribers rather than an inflated number caused by many unused
accounts.
10
The sale started in 1994 with the purchase of 23 per cent by the Sunkyong Group (SK) and was completed
in 1997 when KMTS changed its name to SK Telecom. As of May 2002, KT still retained 11 per cent of the
shares of SK Telecom, but a sale of shares was imminent.
11
CDMA2000 1x, available in Korea since October 2000, was faster than existing networks but did not initially
meet ITU’s requirements for IMT-2000. However, together with the latest evolution of this standard (1xEV-
DO), CMDA2000 1x has now been approved by the ITU as an IMT-2000 standard, retroactively making Korea
the first country to commercially deploy 3G services. For more information, see the ITU Internet Reports
2002: Internet for a Mobile Generation at: www.itu.int/mobileinternet. For more information on IMT-2000
standards, see: http://www.itu.int/home/imt.html.
12
See, for instance, “Korea’s EV-DO 3G service struggling with slow penetration.” Korea Herald. 9 September
2002. http://www.koreaherald.co.kr/SITE/data/html_dir/2002/09/09/200209090018.asp.
13
Interestingly, Korean’s appetite for computer animation is helping to bring North and South Korea closer
together. The “mydinga” 3D computer animations (www.mydinga.com), a series of short animated films
featuring a lazy cat and a cool dog, have been designed in the South (by a subsidiary of Hanaro Telecom)
but subcontracted to the North, where labour is cheaper. They are designed to be downloaded onto different
platforms, such as mobile phones or PC screens.
14
See the report on the Korea Herald website at:
http://www.koreaherald.co.kr/SITE/data/html_dir/2002/05/25/200205250026.asp. The report was carried
out between March 22 and April 15 2002.
15
For more information, see the summary on the KRNIC website at: http://www.nic.or.kr/cgi-bin/EnterBoard2/
enboard.cgi?ActionID=14&dbname=stat_mon&filename=bW9iaWxlIHN1bW1hcnlfZW5nLnBwdA==.2002.07.1211.57.06&index=77.
16
For more information on ENUM, see the ITU website at: http://www.itu.int/osg/spu/enum/index.html.
17
For an extended discussion of this theme, see chapter three (Market Trends) of the ITU Internet Reports
2002: Internet for a Mobile Generation, available for purchase at:
http://www.itu.int/osg/spu/publications/mobileinternet/index.html.
29
3. Sector absorption and ICT applications
E-government 490 ($ 372) 572 ($ 435) Key items in the e-government agenda
IT Infrastructure & 322($ 245) 403($ 306) Software & digital contents development,
Industrial IT Application standardized electronic catalogues
Digital Divide & 228($ 173) 126($ 96) Low-income subsidies for internet access,
Abuse Prevention network & equipment protection
Source: Ministry of Planning and Budget. "Synopsis of the Budget of the Republic of Korea, Fiscal Year 2002."
February 2002.
31
Korea Internet Case Study
free market economy (e.g., recognized the role that ICT could play
competition and innovation), with the to make its society more productive
positive effects of a robust and its government more democratic.
government, such as the protection The government’s leadership and top
of disadvantaged groups and the leaders’ commitment to ICT, combined
promotion of long-term investments with adequate funding, have helped
(see Box 3.1). There is much to learn Korea to spark and maintain its digital
from the government’s active role as revolution. Between 1998 and 2001,
provider, user and promoter of ICT. government spending for information
The emphasis here lies on the word technology doubled, from
active since the Korean government Won 715 billion (US$ 544 million) to
not only provides the necessary Won 1’503 billion (US$ 1.1 billion). ICT
regulatory framework and supportive spending represents 1.4 per cent of
environment but, in an effort to be the government’s total budget and is
one step ahead, also encourages one of the top ten expenditures.
companies to invest in and consumers
to use ICT. The country’s successful ICT
adaptation is partially the result of its
Korea was one of the first countries governmental organization structure.
to emphasize the importance of ICT Some countries in the world have been
as an economic stimulus. It also overtaken by events, without a clear
It may seem unusual to hear a company manager interest rate, to invest in broadband access
say, “It is part of our business culture to listen to networks. The 2000 provision included the condition
the government.” 1 After all, an adversarial that the companies invest in less densely populated
relationship between public and private interests is areas. While this reduced the financial burden taken
common in many countries. But in Korea, there on by the FSPs, the payback of this investment is
seems to be a quiet agreement between substantial. It is estimated that the spill over effects
government and business. Instead of a zero-sum of the investment in broadband Internet services
game, in which one wins what the other loses, there amount to over US$ seven billion and had created
is a culture of mutual and shared interests where 5’000-8’000 jobs by 2001.
both sides can win.
Similarly, government test beds let private
Part of this is uniquely Korean with a tradition of companies experiment with new technologies
government authority. Nevertheless, it is important without the financial risk. The government’s Security
to understand the government’s way of dealing with Net program currently provides companies with
the private sector, which contributes to this support for research on next-generation Internet
equilibrium. The Korean government’s mission is technologies such as the Ipv6 backbone. Another
delicate, in which it influences the market without way of encouraging companies to invest in ICT is
dominating it. Its active intervention is aimed not the ‘Certification Program for Broadband Buildings
only at counteracting market failures but also at and Apartments.’ This initiative certifies the
inducing the private sector to make long-term informatization level of new apartments and
investments by providing a certain degree of buildings. Buildings receive 1st, 2nd or 3rd class
protection. Part of the strategy is to get government certificates, depending on whether they provide
and business officials together. Furthermore, almost over 100 Mbps, 10-100 Mbps or 10 Mbps Internet
all government projects are planned and carried connections.
out in cooperation between the two sides.
A recently announced government plan calls for
To achieve long-term ICT investments, the boosting the country’s information technology
government has come up with different types of export industry by helping smaller Korean
funding mechanisms and policies. It has also c o m p a n i e s e s t a b l i s h a n ov e r s e a s m a r k e t
contributed to the growth of the ICT industry by presence. The initiative, called e-Silkroad, will
being one of the private sector’s best clients for select 50 products that are most likely to be a
information technologies. The Informatization success and ensures the manufacturer receives
Promotion Fund, established by the MIC, is used to financial funding. The government will also
support projects selected by a special committee investigate the market potential for the product
on a competitive basis. In 1999 and 2000, the in different countries. Selected projects include
government provided Facilities-based Service CDMA technologies, games software and home
Providers (FSP) with US$ 77 million, at a very low networking.2
32
3. Sector absorption and ICT applications
CYBER KOREA 21
1. The National Basic Information
(1999-2002) System (1987-1996) was the
•Vision and strategy for a creative Knowledge -based country
first national project to call on the
•Key policy undertaken over 1999 -2002 mobilization of resources to be
•Advanced information infrastructure, increasing national
productivity, creating new industries and jobs used for the use and promotion
National Framework Plan for of computer networks.
Informatization Promotion
(1996-2000) 2. The Korea Information Infra-
•Ten strategic thrusts in education, government administration, e tc. identified
•Building information infrastructure/nurturing IT industry
structure (KII) project, initiated
•Annual action plans in 1995, included the construc-
tion of the national high-speed
Korea Information
Infrastructure Initiative
public backbone, the develop-
(1995-2005) ment of ICT applications, the pro-
•National information superhighway with its applications motion of R&D and IT-related
& technology development pilot projects. KII emphasized
•Reschedule the milestones (originally 1995-2015)
public-private partnership, es-
National Basic Information System tablished an information promo-
(1987 – 1996)
tion fund, which encouraged
•Five Pillars (administration, national defense, public security, finance, education
& research)
private companies to make long-
•First stage (1987-1991) and the Second stage (92 -96) term investments and promoted
•Settlement after investment
research. A certification program
Measures to nurture IT Industry for broadband buildings was
(1987 – 1985)
launched and the government
•Development of electronic industry (e.g. switching board)
•IT Industry Promotion Board provided test beds to help com-
panies avoid risks while at the
same time encouraging R&D. The
KII project has been continuously
Source: NCA. revised and upgraded in re-
sponse to market and technical
developments.
ICT strategy. There are often 3. The National Framework Plan for
competing projects across different Informatization Promotion, initi-
agencies and ministries. Korea has not ated in 1996, set up the annual
allowed itself to be taken by surprise. action plan for different sectors,
The government is characterized by a including government and edu-
clear distribution of responsibilities cation. It also included a blue-
between different agencies. print for an information society
Recognizing the challenges and (with e-government plans) and
opportunities brought about by ICT, set up the Informatization Pro-
the government was quick to motion Committee. This top-level
reorganize existing structures or decision-making body, chaired by
introduce new agencies and to revise the Prime Minister, suggests and
or launch new laws and regulations. evaluates projects. It works to-
Goal identification and measurement gether with and takes advice
have played a crucial role. The ICT from the Informatization Promo-
activities of government ministries tion Advisory Committee, made
and agencies are carefully monitored up of 26 representatives from the
33
Korea Internet Case Study
34
3. Sector absorption and ICT applications
Public-oriented service through a Single Establishing portal site and public information sharing system
Window (G4C: Government for Citizen) for five major databases in the areas of resident registration,
real estate, vehicles, corporate and tax
Linking four major social insurance Linking medical, national pension, employment, and accident
information systems compensation insurances and activating information sharing
Home Tax Service via the Internet 24 hour online service such as tax declaration and payment,
affairs document issuance and tax counselling
G2B: Integrated e-Procurement System Establishing a single procurement window and making all
procurement related processes electronic such as registration,
tender, contract and payment
Integrated National Finance Establishing a system for information sharing and linkage
Management System for finance related institutions
Integrated Administration Information Completing information for all administrative affairs such as
System in local government resident registration and real estate, finance, tax, etc. in
21 cities
Nation-wide Education Administration Establishing an online logistics system for school affairs and
Information System education administration material connecting schools, Office
of Education and Ministry of Education and Human Resources
Development
Personnel Policy Management System Developing and diffusing a standardized system for the whole
human resources including recruitment, promotion, payment
and training of public service personnel
Government e-signature and e-seal Securing reliability for information distribution and
system e-administration such as private information protection and
security
Consolidation of Government Computing Protecting 24 hour working, professional service, and secure
Centres information resources by managing computing environment
in an integrated manner
Source: NCA.
35
Korea Internet Case Study
36
3. Sector absorption and ICT applications
Established in 1976, the Electronics and Multiple Access (CDMA) technology, and its
Telecommunications Research Institute (ETRI, at incubator facility for start-up companies, ETRI has
www.etri.re.kr) is a non-profit, government-funded helped make Korea a competitive force in the ICT
research organization and one of the driving forces field. Current research areas at ETRI include fourth
behind Korea’s ICT success. Some 30 per cent of generation mobile communications and future
its almost 2’000 staff hold a Ph.D. degree and security networks.
another 60 per cent a Master’s degree. Its personnel
hold over 2’000 international patents and have ETRI’s success partly explains Korea’s ICT success.
published some 20’000 articles in Korean and In order for a nation to take a lead in ICT, it must
foreign journals. play an active role in technology research and
development. This helps to nurture local
As the country’s premier developer of innovative sustainability as well as competitive advantage. A
technologies, ETRI’s customers include not only number of ETRI’s projects had their roots in uniquely
the public sector, such as the MIC, but also the Korean problems such as the need for a local
private sector, especially small and medium-sized telephone switch to meet overwhelming demand
companies. ETRI’s technology transfer mechanism in the 1980s. Another example is automated
allows it to commercialize new technologies while Korean/Japanese/English language translators that
also helping to support its existence. Once a ETRI has developed to generate technical manuals,
project has been sufficiently developed and is translate web pages and generate subtitles for
ready to be commercialised, it is handed over to television. ETRI has also helped overcome market
the private sector. Over 800 technologies have so uncertainty by carrying out R&D in areas where
far been transferred from ETRI to some 1’800 business has been reluctant to invest. The payoff
private companies, an arrangement that has has been big with ETRI estimating that sales of
provided ETRI with over US$ 200 million in royalties. products and services using technologies it
Through its development of products such as the developed were some 200 times higher than the
TDX digital telephone exchange and Code Division initial R&D investment.
37
Korea Internet Case Study
ital divide. It has since been ac- 1995, the Korean government
tively promoting policies to pro- has put through over 150 laws
vide universal access to ICTs. The related to informatization. They
2002 Act on Closing the Digital cover a range of topics including
Divide includes the establishment security, privacy, e-commerce, e-
of the Korea Agency for Digital government, intellectual prop-
Opportunity and Promotion erty and reducing the digital
(KADO) as well as a Digital Di- divide. The laws establish a le-
vide Committee and a five-year gal framework for ICT in Korea
Master Plan. Goals are to equip and help promote the develop-
every region in the country with ment of an information society
broadband access, provide a by enhancing confidence in
minimum of one location with online activities. Recent focus
free Internet access for each of has been on information security.
the country’s 3’500 administra- The Secure-e-Korea project, ini-
tive units, offer IT training to tiated by the government in
every interested person, and 2002, features an ICT security
help vulnerable groups (e.g., system that all businesses will
disabled, elderly, etc.) take ad- have to adopt. The project is the
vantage of online content. There government’s response to pro-
are also digital divide projects for tecting electronic information
education and small and medium due to increasing e-commerce
sized enterprises. transactions, online medical pre-
scriptions and other sensitive
• As part of the digital divide online dealings. The government
project, 500’000 primary and is expecting to invest some
secondary school students from 280 billion won (US$ 213 million)
low-income families received ex- in information protection tech-
tra curriculum computer courses nologies and standards over the
during 2000 and 2001. Apart next six years.5
from these lessons, 50’000 low-
income students with good • Learning from and sharing with
grades received a free PC, to- others. The Korean government
gether with a free five-year has been increasingly active on
Internet subscription. 4’500 re- the international front to pro-
cycled PCs were given to the mote ICTs. It not only partici-
needy and free Internet access pates in a number of
is provided in almost 3’000 pub- international and regional organi-
lic places, such as post offices zations dealing with ICT matters
and community centres. The but also organizes an increasing
government also finances re- number of workshops, seminars
search on ICT accessibility for the and conferences. One example
disabled. The government’s war was the July 2002 e-government
on the digital divide is not re- symposium in Seoul, which was
stricted to only Korean citizens. hosted by the MIC and attended
Free Internet access along with by some 200 high-level policy
PCs and other ICT equipment will makers. Organized in cooperation
be installed in locations where with the Asia Pacific Economic Co-
foreign workers (of which there operation (APEC), the meeting
are some 300’000) are housed. was aimed at helping countries to
At the international level, Korea exchange information on e-gov-
is cooperating with various or- ernment projects. Korea is seen
ganizations, including the ITU, as one of the e-government fore-
OECD and APEC, to reduce the runners among APEC members
digital divide. and “keen to publicize the success-
ful implementation of its e-govern-
• Right environment. Since the ment project….paving the way for
enactment of the Framework Act the export of digitalisation solu-
on Informatization Promotion in tions.”6
38
3. Sector absorption and ICT applications
Percentage of Korean Internet users by age and percentage of Korean Internet users by school, 2001
Percentage of Korean Internet users within age Percentage of Korean student Internet users by
groups, 2002 type of school, 2002
91.4 89.8 98.1 97.1 97.5
91.3
69.4
39.3
9.3
Source: KRNIC.
39
Korea Internet Case Study
40
3. Sector absorption and ICT applications
41
Korea Internet Case Study
Located down a narrow street in will not need to bring text books
a quiet section of central Seoul, since digital versions will be
the Sunrin Internet High School available on the school web site.
is identified by a large gray stone Other schools could also download
marker. The stone harks back to textbooks authored by Sunrin
traditional Korea, with its elegant teachers, a pretty prolific lot that
characters written in the country’s have already written 15.
Hangul alphabet. But what is
going on in the school is definitely Sunrin, a traditional vocational
the future. Although all of Korea’s school, was selected as an Internet
primary and secondary schools school because of the enthusiasm
have computers and Internet of the principal and teachers.
connections (the latter According to the principal, a
accomplished in December 2000), traditional vocational school is
Sunrin is different in that the high useless in today’s increasingly
school has been designated as information-driven society.
only one of two Internet high Information Technology (IT) is not
schools in the country. entirely new at Sunrin, which
introduced an Apple Macintosh in
Sunrin has traditionally been 1979 and incorporated computers
noted for the quality of its instruction (as well as into the curriculum in 1982.
its baseball team). It has around 1’000 students
and 80 teachers. School hours are 8:30 a.m. – Teachers are taught IT skills at a private academy
3:30 pm but some students are so hooked they funded by the Ministry of Information and
stay until ten pm. Sunrin is a senior high school, Communication. All teachers have their own PC
roughly equivalent to grades 10-12 in a western and Internet access.
school with students aged 16-18. Like at all Korean
schools, the students wear uniforms that vary by Computer training is divided into four departments:
age and sex. Internet Information Communication, Web-
Managing, Electronic Commerce and Multi-Media
It is still too early to tell what kinds of jobs the Design. Classes range from Unix to learning Web
students will get since the first batch has not yet design. Students also take four hours of English a
graduated. There is job training through cooperation week. In addition, there are extra non-IT courses
with industry and some students are already doing to compensate for too much exposure to computers.
business on the side. It was noted that the Internet
allows a student’s web site, if well done, to be An interesting example of the multimedia approach
indistinguishable from those of large companies. is a math class that uses an electronic chalkboard
to teach students how to program Eratosthenes
Before learning focused on text but now includes Sieve, an algorithm for identifying prime numbers.
images and sounds. Movement, sound, and design Thus students learn math and computer
are important at the school since they form part of programming as well as some English, killing three
the new digital content. Sunrin is also big on music birds at once. So, while Sunrin Internet High School
and there is a lab with equipment for experimenting teaches the basics just like any other Korean high
with digital sounds. The advantage is that you do school, it is moving away from conventional teaching
not have to have the methods and towards a new educational
actual instrument, environment focused on
allowing many more training digital
students to participate in generations.
learning music. Students
make their own music, There are over 600 PCs
including adding and 16 PC Labs, many
soundtracks to videos they with the latest equipment.
have created. Content Most PCs are Samsung
development is also brand, manufactured by
taught. For example Korea’s largest electronics
students study Japanese company. The school has
Manga cartoons for insight two E1 (2.048 Mbps) lines
into graphical design. for Internet access paid by
the government; much
There are plans to create a faster than the normal
cyber library. It is expected 256 kbps the government
that in the future students provides to other schools.
42
3. Sector absorption and ICT applications
43
Korea Internet Case Study
Until October 2001, educational institutions in Korea as education and training institutes) and even
used the generic .ac domain name for their web sites. kindergartens (.kg). This policy allows users to easily
After that date, new second level domain names were identify the nature of a web site. It also expands the
created for elementary schools (.es), high schools number of possible web sites and makes sure that
(.hs), middle schools (.ms), other schools (.sc, such Korea does not run out of domain names.
Second level education domain names in Composition of second level education domain
Korea (.ac.kr) names in Korea, 2002
10’473
9’873 sc.kr
ms.kr hs.kr 2%
24% 18%
ac.kr
10%
kg.kr
593 831 es.kr 3%
109 206 310 395
43%
1995 1996 1997 1998 1999 2000 2001 2002
Note: From October 2001, all school second level domain names are included under academic (.ac). This
explains the large jump particularly as that was the period when many schools established web sites.
Source: ITU adapted from KRNIC.
44
3. Sector absorption and ICT applications
Australia, Canada, India and the United related questions that will be
States. Some 900 students participated answered and posted on the web site.
in this scheme in 2002. One of the most computerized parts
of the health sector is the Health
3.3 Health Insurance Review Agency (HIRA, at
www.hira.or.kr), an independent
3.3.1 The health sector agency set up in 2000 to review and
Korea’s health sector consists of process health claims (See Box 3.5).
1’000 hospitals, 20’000 public health
centres, 18’000 pharmacies and The first telemedicine project was
60’000 doctors. The health insurance launched as early as 1994, in
system has progressively been conjunction with the Korea
improved since the 1970s and Information Infrastructure (KII)
universal health insurance coverage initiative. The pilot project delivered
for all citizens has been in place since medical services using interactive
the late 1980s. Every citizen, whether technologies to rural residents. 12
employed or self-employed, falls under Other pilot projects have followed, by
the health insurance system, financed both the government as well as private
by contributions made by the insured, hospitals. In addition to the rural
employers and by government experiment, government telemedicine
subsidies. Those who cannot afford to projects included a service providing
pay for health care (about three per counselling and therapy for people
cent) receive assistance. suffering from dementia and a service
between homes and hospitals. The
The Korean Ministry of Health and experience has been mixed. Most
Welfare (MOHW, at www.mohw.go.kr) problems are of a non-technical nature
is responsible for health policy. Its and include the reluctance of doctors
budget amounted to Won 7.52 trillion to be involved (partly because they
(US$ 5.7 billion) in the year 2001, have not been able to charge for the
representing 7.5 per cent of the service) and affordability issues for
government total. users who cannot pay the
communication charges. Telemedicine
Despite the rapid advances made in is not covered by the national health
improving the nation’s health, there insurance scheme. Perhaps the
is a feeling that more can be done. biggest barrier has been that
There is particular interest in using telemedicine remains technically
ICTs to enhance medical service given illegal due to a fifty-year old law that
the rising costs of health care and new only allows face-to-face
developments in medical technology. consultations.13
However, ICT absorption in the health
sector has been held back by legal Despite the legal uncertainty
restrictions. There is also a lack of regarding online health, some Korean
coordination with a number of companies offer services to
promising projects but no overall consumers as well as to companies in
scheme for incorporating the results the health business. Some also sell
into a national policy. medical equipment and provide
multimedia content, such as live
3.3.2 ICT in the health care operations and medical seminars. The
sector Dental Network of Korea
By March 2002, 813 medical <www.dentnetkorea.com/index.html>
institutions were connected to the has a database containing information
government’s Internet backbone on dental services, clinics, locations, etc.
through 953 high-speed links. This It also provides services to dentists,
includes the MOHW as well as most of dental suppliers and laboratories, and
the nation’s hospitals. The MOHW web functions as a dental market place with
site offers information about the data on equipment manufacturers,
health system, policies and links to importers, exporters, etc. CyberHospital
news regarding health care. One <www.HealthKorea.net> was launched
section allows users to ask health in June 1998 and over one million
45
Korea Internet Case Study
The Health Review Insurance Agency (HIRA) is 77 per cent of all claims electronically. An additional
responsible for processing medical claims in 15 per cent are submitted by diskette and the
Korea. With close to 600 million claims a year, remaining claims are sent in paper format. The
HIRA has a strong incentive to promote efficient benefits of electronic processing have been
and timely processing through the adoption of enormous. Errors have been reduced significantly,
information technology. It has been actively the number of steps involved reduced dramatically,
encouraging medical care institutions to adopt price checking done instantaneously and there is
Electronic Data Interchange (EDI) technology for no more need to maintain rows of paper files.
submitting claims. HIRA has a backbone network
connecting its seven regional offices through high- Besides making the processing of medical claims
speed ATM links to the headquarters in Seoul. more efficient, the system also allows patients to
Medical institutions can log into HIRA’s site to check their medical records. Every patient has a
submit their claims. Although not all health care personal identification number and, by connecting
providers use the EDI system to make their to the HIRA server, can check information such as
reimbursement claims, most do. Out of a total of their medical expenditures. HIRA has a near term
63’675 medical care facilities, 42’280 are target of having over 90 per cent of medical
connected to the network and HIRA receives institutions submitting electronic claims.
Paper Paper
17% 8%
Diskette
15%
Total medical Total claims
Diskette care facilities Jan.-Apr. '02:
17% April 2002: 199 milion
63'675 EDI
66% EDI
77%
people have logged into the site. One with an Internet connection, and you
application features a home unit have the prerequisites for Korea
providing remote monitoring of pulse becoming an electronic commerce
and blood pressure that is hooked up paradise.
to CyberHospital via the user ’s
Internet connection. Though official statistics on
e-commerce have only been compiled
3.4 Electronic commerce in for a short time, they suggest that
Korea Korea’s e-commerce market is growing
rapidly. Estimated at US$ 9 billion in
3.4.1 Where Korea stands… 2001, the Korean e-commerce market
With over 70 million credit cards, there represented 2.1 per cent of the
is more plastic than people in Korea. economy. E-commerce in Korea is
Match those credit cards with the predicted to grow dramatically to almost
57 per cent of the Koreans online and US$ 200 billion by 2004, and make up
the 60 per cent of Korean businesses almost 18 per cent of the economy.
46
3. Sector absorption and ICT applications
Note:
Source: ITU adapted from NSO, MIC, NetValue.
3.4.2 … and how it got there While several government entities are
Factors that have facilitated the involved in the promotion of
growth of e-commerce include the e-commerce, tasks are clearly divided.
country’s high-speed information The main responsibilities are with the
communication network and large Ministry of Commerce, Industry and
number of Internet users. The Energy (MOCIE, who is responsible for
government had also established policies and regulations) and the
47
Korea Internet Case Study
Establish basis for cyber trade Amend cyber trade support act
Establish a unified buyer development system
Source: "General Plan for Activating e-Commerce", February 15, 2000. From 2001 Korea Internet White
Paper, NCA, MIC.
48
3. Sector absorption and ICT applications
in the public sector has a spill over companies, and to secure an open
effect on the business community system of mobile Internet portals that
since not only do businesses bid for allows mobile Internet users to connect
government contracts, the government to their favourite Internet sites.
also uses B2B sites to procure goods
and services. According to the National 3.4.3 E-Businesses
Statistical Office (NSO) the “public Out of some 360’000 Korean
sector plays a leading role for the companies with more than
development of electronic commerce in five employees, 60 per cent had
the sense that it, with its immense access to the Internet in 2001. The
purchasing power, is strong enough to rate rises with the size of the firm,
encourage and stimulate the private ranging from less than 50 per cent
suppliers to introduce e-business in a among companies with less than five
short period of time”. 17 Since the employees (45 per cent of the total
government established the electronic number of companies with Internet
procurement system in the public sector access) to over 95 per cent among
in 2000, the NSO has launched a firms with more than 300 employees.
quarterly “E-commerce Survey on Some ten per cent of companies with
Government.” In 2001, Business to Internet access engaged in
Government (B2G) transactions e-commerce. Again, the range varies
accounted for Won 704 billion (US$ 545 with larger companies more intensive
million). The survey covers 57 users of e-commerce (see Figure 3.4,
government organizations carrying out right chart).
e-commerce.
Business-to-Business (B2B)
Preparations for next generation e- e-commerce surveys are carried out
commerce include the development of by the NSO every three months. Total
mobile e-business (m-commerce). B2B activity in Korea was
The government has started to Won 11 trillion (US$ 8.4) billion and
develop mobile application servers accounted for 92 per cent of all
and to create a stable environment e-commerce in the country in 2001.
by establishing the necessary The B2B e-commerce survey
authentication system for mobile disaggregates data by buyers, sellers
businesses and billing methods. It has and intermediaries. The former, where
also made it its task to establish fair transactions are carried out on sites
profit sharing rules among content controlled by the buyer, account for
providers and mobile telecom more than three-quarters of
5-9 Korea 10-49 50-299 300- >1000 5-9 Korea 10-49 50-299 300- >1000
999 999
49
Korea Internet Case Study
transactions. This reflects the size of include all identifiable online shopping
large corporations who use their sites malls in Korea, 2’427 in June 2002 up
to order raw materials and by 412 from a year earlier. The survey
components needed for productions. includes information on the number of
Intermediary sites such as cyber malls, the value of transactions
e-marketplaces account for only a and the type of products purchased. In
small portion (3.5 per cent) of e- 2001, the total value of B2C
commerce sales in Korea. e-commerce in Korea was
Won 258 billion (US$ 200 million), a
The government has made an effort figure already exceeded in the first six
to tackle the business digital divide months of 2002. Goods accounted for
by assisting small and mid-sized firms. the largest value of consumer online
This includes the provision of high- purchases in 2001. PCs and related
speed Internet access, education, the accessories accounted for the biggest
establishment of a support centre, and share (29 per cent), followed by
aiding firms through information electronic appliances (24 per cent)
status diagnosis and strategy and then household goods (six per
planning. The government’s Small cent). Travel reservations and books
Enterprises Networking Project is made up the next largest categories
aimed at helping small companies (each with five per cent). It should be
(with less than 50 employees) to catch noted that these figures are biased in
up in IT. These companies often favour of value rather than volume.
cannot afford to have an IT team or When consumers are surveyed, the
to purchase the necessary IT material. category they purchase the most of
They find themselves in a vicious cycle online is books.
where the lack of demand for IT
products for their companies leads to According to the NSO’s March 2001
a small market and few innovations. Computer Use and Internet Survey,
To break this cycle and to help a new almost half of Korea’s Internet users
market develop, the government, had visited a shopping site while
through the National Computerization 15 per cent made an online purchase.
Agency and the MIC, selects three Of those who did not, trust was the
consortiums to provide companies biggest concern. While 32 per cent say
with the necessary infrastructure and they have ‘little confidence in the
services (e.g., PCs, high-speed purchase’, another 21 per cent say
Internet access, on-line tax return they are ‘concerned about the fraud
application and industry specific of e-commerce transactions’ and ten
services), as well as the necessary per cent have ‘security or privacy
training. These are provided at concerns’. 19 Almost ten per cent
minimal costs. “In a nutshell, the core stated that they had not made an
strategy for this project is to bring two online purchase because they did not
subjects of this project together, have Internet access at home.
which are small enterprises and IT
service companies, to move forward Despite concerns about security, credit
with Win-Win strategies.”18 cards are the number one B2C payment
method (54 per cent of transactions).
3.4.4 Business-to-Consumer This is not a surprise considering the
(B2C) large number of credit cards in
B2C statistics are collected through the circulation. Electronic fund transfers are
monthly NSO Cyber Shopping Mall used for 44 per cent of transactions.
survey. Cyber shops refer to businesses Other payment methods, including
with web sites selling products online “electronic money” only accounted for
aimed at the consumer market. They two per cent.
50
3. Sector absorption and ICT applications
Korea’s National Statistical Office (NSO) is a leader • The B2B survey aims at analysing the effect
in measuring informatization. The NSO has launched of e-commerce on business processes and
a number of projects to track the development of goes into some detail on how companies work.
ICT in Korea. In March 2001, the NSO conducted For example, it distinguishes between ‘open’
its first Computer and Internet Use Survey (CIUS).20 and ‘closed’ transactions. While an open trans-
The CIUS surveyed 80’000 people and 30’000 action would imply bidding process, a closed
households regarding their use and access to ICT. It transaction would only include predetermined
is arguably one of the most detailed reports ever companies. This kind of detail may help to
issued regarding a nation’s digital status. The NSO evaluate the benefits of using e-commerce,
has also been tracking e-commerce since early 2001. such as transparency, competitiveness and au-
It carries out a monthly survey on Business-to- tomation. Some companies are reluctant or
Consumer (B2C) e-commerce, the Cyber Shopping unable to provide this kind of detail.
Mall Survey. It also conducts quarterly surveys on
Business-to-Business (B2B) and Business-to- • Companies are sometimes reluctant to give
Government (B2G) e-commerce. One of the exact e-commerce details and vary in the so-
challenges with being an e-commerce measurement phistication of their record keeping. Compa-
pioneer is dealing with various methodological issues: nies that operate in more than one sector may
forget to include information on all sectors.
• The NSO asked businesses to disaggregate The choice of the proper respondent is im-
purchases by buyer in order to identify the portant and in some cases it might be better
type of B2C consumer. This has proven diffi- to separate different economic sectors from
cult since many businesses collect data on one another.
transaction values, not by purchaser. Another
problem with the B2C survey is that it is diffi- To minimize measurement errors, the NSO has
cult to identify all companies that offer e-com- several suggestions. Since some companies
merce transactions. predominantly sell and others predominantly
purchase goods and services (for example,
• The definitions and concepts used in the sur- construction companies have more purchasing
veys are not always consistent with those used than selling transactions), the survey should
by the participating companies. Some com- enquire about sales and purchases. This would
panies that use computer communication net- enhance consistency and error checking since the
works to conduct business consider their sum of all purchases should roughly equal the
transactions to be traditional. sum of all sales.
51
Korea Internet Case Study
1
Quote by one business manager during ITU interviews. May 2002.
2
Yang Sung-jin. “Seoul to launch IT export drive ‘e-Silkroad’”. The Korea Herald. 9 June 2002.
www.koreaherald.co.kr/SITE/data/html_dir/2002/09/06/200209060017.asp.
3
Informatization of Korea. National IT Initiatives. National Computerization Agency (NCA). February 2002.
4
“Major achievements of Korea’s e-government program.” The Korea Herald. 4 July 2002.
http://www.koreaherald.co.kr/SITE/data/html_dir/2002/07/04/200207040004.asp.
5
Kim Deok-hyun. “Secure-e-Korea Campaign Launched”. Korea Times. 15 July 2002.
6
Yang Sung-jin. “Top APEC policymakers explore key issues in taking government online.” The Korea Herald.
4 July 2002. www.koreaherald.co.kr/SITE/data/html_dir/2002/07/04/200207040006.asp.
7
UN. Benchmarking E-Government: A Global Perspective. May 2002.
http://www.unpan.org/e-government/Benchmarking%20E-gov%202001.pdf.
8
The term edutopia was first used by the Presidential Commission on Education Reform in 1995 to describe
the establishment of “an education welfare state – a society of open and lifelong education to allow each and
every individual equal and easy access to education at any time and place”.
9
2001 Adapting Education to the Information Age. A White Paper. Ministry of Education & Human Resources
Development.
10
2001 Adapting Education to the Information Age. A White Paper. Ministry of Education & Human Resources
Development.
11
Keris. 2001 Adapting Education to the Information Age: A White Paper. December 2001.
12
Lee, Sung-Ok. “Telemedicine in Korea: Current Status/Prospect.” 8 June 1999.
www.itu.int/ITU-D/hrd/publications/reports/1999/telemed/pdffr/15-BIS-ARG-KOREA-E.pdf.
13
For a detailed analysis of telemedicine in Korea see Jim Briggs. Telemedicine and related technologies in
South Korea. 2001. http://www.tis.bl.uk/korea/Full_report.htm.
14
“Top APEC policymakers explore key issues in taking government online.” The Korea Herald. 4 July 2002.
www.koreaherald.co.kr/SITE/data/html_dir/2002/07/04/200207040006.asp.
15
The E-Commerce Policy and E-Commerce Assistance divisions in the Industrial Policy Bureau handle
electronic commerce issues within MOCIE. In addition to MOCIE and MIC, other government agencies
involved with e-commerce include: Korea Free Trade Commission (consumer protection), Ministry of Culture
and Tourism (intellectual property) and the Public Procurement Service (e-commerce in the public sector).
16
Secure-e-Korea Campaign Launched. Korea Times. 16 July 2002. [I cannot find this article]
17
E-Commerce Statistics in Korea. Korea National Statistical Office (KNSO). Presentation prepared for ITU
representatives in May 2002.
18
“Small Enterprises Networking Project.” Paper presented by the MIC to ITU representatives. April 2002.
19
KNSO. Report on the Computer and Internet Use Survey. 2001.
20
English language summaries of NSO ICT subject reports are available on their web site at www.kso.go.kr.
52
4. The Information Society in Korea
4.1 The Vision of a Creative, “We … will further strive to become the
Knowledge-Based Society world’s most advanced IT power. To
realize this goal, we will push ahead with
Korea’s emergence as the world leader our e-government initiative, develop
in information and communication the software and content industries, and
technologies (ICT)—in fields such as educate the public to make them the
broadband Internet, semiconductors most computer literate citizens in the
and third generation mobile and so world. Furthermore, we plan to resolve
on—it is not an accident. The the digital divide between regions and
government has specifically targeted among different classes of people, and
this objective. It is no coincidence that encourage safe and sound use of
the period of most intensive information.”
investment in broadband infrastruc-
ture corresponded with recovery from These are ambitious goals but they are
the worst effects of the Asian Financial founded on impressive performance.
Crisis in the late 1990s (referred to The combined value of the Korean ICT
by the Koreans as the “IMF” crisis). industry in 2001 was Won 150.5 trillion
Again it was because the Korean (US$120 billion), and this figure has
government specifically planned this, been growing by an average of 18.8 per
despite the general level of austerity cent a year since 1997, more than three
imposed by the IMF’s conditions for times faster than the rest of the
their assistance. economy (although ICT sector growth
was slower in 2001 as the market went
In Korea, the ICT sector is seen as a into recession worldwide). Overall, the
driver of economic and social ICT sector contributes around 13 per
development. To quote from the cent to Korea’s Gross Domestic Product
Minister of Information and (see Figure 4.1). Furthermore, the ICT
Communication, Dr. Seung-taik Yang’s sector provides some 1.3 million jobs
introduction to the 2001 White Paper: (around 5.4 per cent of total
In terms of its contribution to Gross Domestic Product, and broken down by sector,
in trillions of Won, 1997-2001
Korea's ICT industry, by contribution to GDP Korea's ICT industry, by sector (in US$ billion)
(in trillion Won) $140
160 $120
13.0% 12.7%
140 Electronic
11.2% $100
120 components
100 8.6% 9.3% $80
80 $60 Info Eqpt.
60 Comms Eqpt.
Total IT production $40
40 Software
Value-added in IT $20
20 ICT services
IT as contribution to GDP
0 $0
1997 1998 1999 2000 2001 1997 1998 1999 2000 2001
Note: "Info equipment" includes also a small contribution from broadcasting equipment.
Source: MIC, "IT Korea 2002: The Vision for Constructing a Creative, Knowledge-Based Society".
53
Korea Internet Case Study
Source: MIC IT Korea 2002 (left chart), NCA Korean Internet White Paper 2002 (right).
54
4. The Information Society in Korea
55
Korea Internet Case Study
Computer security incident reports Arrests made in Korea for computer security offences
in Korea 65’033
8’000
Hacking
Computer viruses 50’124 7’000
Hacking/virus arrests
6’000 7'595
39’346 Cyberterror arrests
5’000
4’000
3’000
2’000
5’333 1’000
572 1’943 278
18 23
0
1999 2000 2001 1998 1999 2000 2001
56
4. The Information Society in Korea
57
Korea Internet Case Study
Perceived effects of the Information Society on sense of alienation and on job opportunities, by level of
education of respondent, as percentage of respondents, in Korea, 2001
40
20
20 10
0 0
Elementary Middle High school University Elementary Middle school High school University
school school school
Source: Korea National Statistical Office, Report on Computer and Internet Use Survey, 2001.
60s responding that they did not know graduates feel that the information
what the effects of the information society increases the sense of
society would be on their lifestyles, alienation. Perhaps surprisingly,
suggesting perhaps that they had not teenagers admit to being more
had much exposure to it (see alienated than those over the age
Figure 4.4, left chart). of 60, but perhaps again this is the
result of much greater use of PCs, and
Views of the information society also especially video games, amongst the
vary with level of education (see former group. The potential threats of
Figure 4.3), with university graduates the information society on social
being much more confident of the development are keenly felt in Korea
benefits (87 per cent) than those with and the dark side of the information
only primary school education (58 per revolution has several facets (see
cent). Similarly, those in professional Box 4.2).
occupations (87 per cent) are more
confident than those in agricultural or 4.3.4 So, what are the benefits
fishing occupations (70 per cent). of the information
Views of the information society society?
become rosier with wealth. Those on One might imagine that Koreans’
incomes of less than one million Won concerns about the intrusive nature
(US$ 810) per month see twice as many of the information society and its
inconveniences as those on incomes contribution to the individual’s sense
above 4.5 million Won (US$ 3’650). of alienation might be offset by the
prospects for new jobs. After all,
4.3.3 Sense of alienation almost 300’000 new jobs have been
One of the most interesting questions created in the sector since the mid
in the survey concerns the effects of 1990s. But in reality, ordinary Koreans
the information society on the sense are far from convinced. Slightly more
of alienation. Almost three times as Koreans (29 per cent) feel that the
many Koreans feel more alienated information society will generate fewer
because of the Information Society job opportunities than those (28 per
than less alienated and the sense of cent) that feel it will create more jobs,
alienation grows as the level of and women are more pessimistic than
education grows. Therefore, almost men. Perhaps surprisingly,
60 per cent of college or university perceptions do not seem to vary
58
4. The Information Society in Korea
Perceived effects of the Information Society on personal lifestyles and personal privacy,
by age group, as percentage of respondents, in Korea, 2001
Effect of information society More convenient Effect of information More privacy problems
on lifestyle, by age group No change society on privacy, by No change
(% response) Less convenient age group (%) Less privacy problems
Don't know
100 Don't know 80
80
60
60
40
40
20
20
0 0
15-19 20-29 30-39 40-49 50-59 Over 60 15-19 20-29 30-39 40-49 50-59 Over 60
Source: Korea National Statistical Office, Report on Computer and Internet Use Survey, 2001.
59
Korea Internet Case Study
While Korea’s ICT developments have brought else might make being the real you boring or
economic and social progress, it is not all a bed of irritating.
roses. Thorns of different shapes and sizes have
surfaced. Content-related problems are not uniquely Korean
phenomena. Stories about paedophile or racist sites
One example is online game addiction, which has have appeared in many countries. But a country
become a major problem. The excessive use of like Korea, with ubiquitous access, is probably even
online games is particularly noticeable among more vulnerable to harmful sites. A Korean
teenagers and people in their early twenties, who children’s portal carried out a survey and found that
play at home or at one of the some 25’000 PC bangs more and more kids were affected by adult content
(online game rooms). In one case, a Korean web sites. The survey (which addressed children
computer user died in a PC bang, after three days under 13 years of age) revealed that 28 per cent of
of continuous games playing. Apparently, he had the respondents had access to adult web sites.
been so engrossed in the game that he forgot to Some 53 per cent accidentally came across these
eat, drink, or sleep. This illustrates that cyber life sites and 32 per cent accessed them through spam
can sometimes be more gripping than real life, and or unsolicited emails. Some 85 per cent of these
that one can die of neglect even when surrounded kids said that spam was a serious problem.5 New
by other people. The Korean Education Research problems need new solutions and government
and Information Service (KERIS) has launched a intervention in this field includes the declaration
research study into the problem of alienation on ‘The Principle of Netizen Ethics’ in June 2000.
amongst young people. In addition, the MIC has The Korean Government has also organized several
established the Centre of Internet Addiction campaigns on ethical awareness.
Prevention and Counselling to help combat the
problem. The Centre is equipped with group and One problem is that Korea has very few countries
individual counselling rooms and provides free it can look to for advice. The good news is that it is
advice to addicts. It also has plans to focus its already grappling with the issue and other countries,
programme on the prevention of addiction. Parents that are starting to experiment with broadband
and teenagers likewise will be addressed and attend access and likely to eventually encounter similar
lectures on the topic. problems, will benefit by monitoring Korea’s
experiences.
While this example may be an extreme one, the cyber
café and games culture in Korea has other less flagrant This applies to another area, too. The fact that Korea
but perhaps harmful consequences for kids. Who is not only a bandwidth paradise but also a hacker’s
knows how healthy it is for young people to spend paradise, has forced the government to take several
several hours a day in front of a PC screen. The strain steps to combat cybercrime. While Korea has made
put on the eyes, the brain and ears by constantly great efforts to make its cyberspace safer (see
changing colours, flying and flashing objects and often Box 4.1), government officials admit, “side effects
loud and aggressive sound effects (PC bang users of digitisation such as hacking, computer virus and
usually wear headphones) have not yet been fully privacy infringement and spam mail are yet to be
studied. tackled.”6 Not an easy task, especially when hacking
has become a real sport. A US$ 100’000 hacking
PC bangs and online games are also modifying social competition (in which a Korean security company
interaction. As one observer says “[PC bangs challenged hackers to crack their server and leave
are]…rabbit warrens of high-bandwidth connectivity their registration details in order to receive the
… where young adults gather to play games, video- prize) ended in turmoil with no winners, when
chat, hang out and hook up.”4 They allow people to hackers attacked the server with the registration
pretend to be someone completely different. details. The message the hackers left: “One has to
Avatars, personalized online personas, allow Korean keep in mind that no matter how many precautions
Internauts to assume new personalities. Although you take, there will always potentially be a way to
it may be just a game, the need to be someone hack the system.”7
60
4. The Information Society in Korea
1
See “Present status of cyber-terrorism in Korea and its countermeasures”, presentation by Mr. Kun-won Yang
at the ITU New Initiatives Workshop on Creating Trust in Critical Network Infrastructures, Seoul,
20-22 May 2002, available at: http://www.itu.int/osg/spu/ni/security/workshop/presentations/cni.22.pdf.
2
For information, see the ITU website at: http://www.itu.int/ITU-T/worksem/security/index.html.
3
For more information, see the ITU website at: www.itu.int/cni.
4
J.C. Herz. “The Bandwidth Capital of the World.” Wired Magazine. August 2002.
www.wired.com/wired/archive/10.08/korea.html
5
“More children have access to porn sites.” The Korea Herald. 22 July 2002.
http://www.koreaherald.co.kr/SITE/data/html_dir/2002/07/22/200207220033.asp
6
Yang Sung-jin. “Korea leads Asia in IT infrastructure: ‘Global leader, e-Korea project’ accelerating IT drive.”
The Korea Herald. 31 May 2002.
http://www.koreaherald.co.kr/SITE/data/html_dir/2002/05/31/200205310073.asp
7
Matt Loney. “$100K hacking contest ends in free-for-all.” ZDNet (India). 4 June 2002.
http://www.zdnetindia.com/techzone/resources/security/stories/58719.html.
61
5. Conclusion
5. Conclusion
June 2002
Dimension Value
Pervasiveness
4
Pervasiveness 4.0 3
Geographic Dispersion 4.0 Sophistication 2 Dispersion
1
Sectoral Absorption 4.0
0
Connectivity Infrastructure 4.0
Organizational Infrastructure 3.5 Organizational Absorption
Sophistication of Use 3.0
Connectivity
TOTAL 22.5
63
Korea Internet Case Study
64
5. Conclusion
Note: Number in parenthesis refers to previous year rank. Percentage in parenthesis refers to rank as a
per cent of total countries ranked.
Source: ITU adapted from NCA, EIU, IMD and IDC.
65
Korea Internet Case Study
Fixed telephone lines per 100 inhabitants Mobile cellular subscribers per
100 inhabitants
72
With ISDN
73
channels
47 Total
61
Switzerland Switzerland
Korea Korea
Without 45 43
ISDN Subscription
channels based
47 61
7.3 36’970
Conventional
Hosts Switzerland measure Switzerland
0.9 Korea 9’400
Korea
30.8 31’320
Purchasing
Users Power Parity
51.1 18’110
66
5. Conclusion
Reasons for Korea’s ICT success and whether they are replicable in other nations
Factor Exportable?
Education. Korea’s high level of education—in terms of Korea’s success suggests that if countries want to be
both school enrolment and educational attainment—has successful in ICT, they need to commit resources for
contributed to the Korean population’s ability to learn education. Providing ICTs to educational institutions and
and use ICT. enhancing ICT training is essential. This should be the one
of the main thrusts of government ICT policies.
Geography. 80 per cent of Korea’s population lives in Countries that have high levels of urbanization can more
urban areas. Apartments account for 48 per cent of easily install broadband infrastructure. This includes much
Korea’s housing stock and provide dwelling for 40 per of Central and Eastern Europe and Latin America. However,
cent of its population. This high population density this factor is not relevant for regions such as Africa or
simplifies network development and lowers costs South Asia with large rural populations.
investment.
Competitiveness. There are a number of broadband The lesson here is facilities-based competition, one that
service providers creating the competitive environment even developed countries can learn from. Too many
necessary for lowering prices and speeding network nations have focused on local loop unbundling as the way
deployment. Although local loop unbundling is possible towards creating a competitive broadband market. The
in Korea, most broadband providers are facilities- results have not generally been very successful. Korea has
based. The availability of a variety of broadband shown that facilities-based competition, even in a mature
technologies (xDSL, cable modem, wireless, fibre optic network, works. The other lesson is the competitive
LANs) adds to competitiveness and dynamism. pressure of alternative broadband technologies. Countries
should license cable television and high-speed wireless
access providers to offer an alternative to incumbent
telephone operator xDSL services. It should be noted that
Korea’s cable television network is young, just over a
dozen years old. Countries without cable television
networks might find they could quickly develop them by
offering potential investors licenses to provide telephony,
entertainment and cable modem services.
Government. Korea’s high level of ICT adoption is no A key point is that income from license fees remains in the
accident. It is the result of years of government ICT sector to finance public networks (e.g., government,
policies, planning and financial support for targeted education) as well as to assist with providing access to
areas. A high level of cooperation between government disadvantaged groups. Another point is that while
and the private sector has assured success. infrastructure development is most likely best handled by
Furthermore, license fees from the ICT industry remain the private sector, governments nonetheless have a crucial
in the ICT sector and are not transferred to other areas role to play in overall ICT strategy and universal access
of the government budget. This has provided seed policies. A third point is the success of Korea’s collaborative
funding for the Ministry of Information and approach between government and industry. All of these
Communication to invest in areas such as low interest points can be adapted by other nations.
loans for network roll out, ICT training and providing
access to disadvantaged groups.
Equipment. Korea has a large ICT equipment industry Most developing countries do not have large ICT equipment
with well-known names such as Samsung and LG. This manufacturers like Korea. Nonetheless, they could try to
has assisted development in that domestic achieve the same benefits through open, competitive
manufacturers have been able to produce ICT products tendering for ICT projects. Local industry could also forge
at reasonable costs. Korea’s export orientation has put partnerships with overseas equipment vendors to
a focus on product development in technologies in manufacture locally and transfer technology.
which it can play a lead role. This in turn has had a
favourable impact on its domestic market by keeping it
advanced.
Socio-economics. Korea has a much higher level of ICT The fact that Korea’s ICT development is at a significantly
penetration than its economic level would suggest. The higher level in relation to its per capita income is great
UN classifies it as a developing nation and its per capita news for other countries. It means that ICT access does
income is not in the highest grouping. Korea’s relatively not have to be constrained by income. On the other hand,
large population of some 47 million make for a big the relatively large size of Korea is not something all
market in terms of achieving economies of scale and countries can benefit from. However, they can leverage the
attracting investment. same benefits by participating in regional grouping
particularly for infrastructure projects and bulk equipment
purchases.
Source: ITU.
67
Korea Internet Case Study
share them with others through access.4 Korea has also hosted two
participation in international forums ITU workshops on network security in
and hosting of workshops. In the case 2002. However, it can go further in
of the ITU, Korea made a proposal to spreading the secrets of its success
the World Telecommunication by offering firmer support for technical
Development Conference calling for assistance and advice to other nations
developing nations to explore use of that want to become information
xDSL technologies for broadband societies.
68
5. Conclusion
The focus of this report is the Republic of Korea— linguistic and ethnic similarity, there are probably
popularly referred to as South Korea. Yet, it is few countries as far apart in development. North
not the only Korea. The other occupant of the Korea has pursued a socialist self-sufficient
Korean Peninsula is the Democratic People’s oriented path, guided by state planning. South
Republic of Korea—commonly referred to as North Korea has a market-oriented economy, and is
Korea. Once one country, cold war tension export oriented. The results are two different
following the Second World War led to the creation countries in terms of economic and ICT
of two separate republics. Despite their cultural, development (see table below).
Note: * Refers to “Intranet” users of closed government network. Officially, Internet access is not available
although some users may dial-up ISPs in China or Japan.
Source: ITU, Korea (Rep.) Ministry of Unification and Ministry of Information and Communication.
The North has a low level of telecommunication North Korea. The major problem is where the North
development not only compared to the South but could obtain the funding. Current services do not
also in relation to other nations. North Korea’s fixed generate sufficient income for an investment of that
telephone density is just over two, about the same size and vendor financing is problematic. Since the
level as low-income nations. It does not have a North is not a member of regional or multi-lateral
mobile cellular network. The North has financial institutions such as the Asian Development
30’000 “Intranet” users, mostly in the government Bank or the World Bank it cannot obtain financing
and research centres that can access databases and from those sources. The only feasible alternative
exchange e-mail through a closed network. North seems to be some kind of partnership with foreign
Korea’s Internet domain name is .KP but no companies such as a joint venture or build-transfer
administrator has been assigned and it is not arrangement.
believed there are any web sites in the country.
The national news agency has a site hosted in Japan. The South could help given their higher level of
development and ICT success. There appears to be
The North Korean government has expressed a some interest by South Korean firms to invest in
desire to upgrade its telecommunication network, the North’s ICT sector. Officials of South Korea’s
to provide more citizens with telephone service and largest mobile operator, SK Telecom, have been to
to adopt the latest information and communication the North to discuss the construction of a CDMA
technologies. Mobile would have a lot of potential mobile network. Hanaro, the South’s second largest
to alleviate telephone shortages in North Korea since broadband operator, is working with North Korea to
a wireless network can be installed relatively quickly. build broadband equipment as well as provide
According to one report, if mobile services were animation services. Despite the dearth of ICT
introduced, the number of subscribers would climb development in the North, there are some bright
to 50’000 the first year and to 1.8 million within areas. One field doing relatively well in is software
five years, surpassing forecasts for the fixed development. Researchers at the Kim Jung Suk
network. Teachers College have developed over
2’000 educational software titles. The Silver Star
It is estimated that it would cost around Computer Technology Institute, created in 1995, has
US$ 500 million over a five-year period to improve exported software to Japan. The government has been
the telecommunication network, launch a mobile organizing an annual software contest for the last
network and extend telecommunication access in decade and is committed to increasing IT training.
69
Korea Internet Case Study
1
The Korean Network Information Centre (KRNIC) carries out regular surveys to determine the number of
Internet users in the country. An Internet user is defined as a person, over the age of six who uses the
Internet at least more than once a month. See http://stat.nic.or.kr/iuser/image/survey-dom.gif.
2
This term was used by the American author Mark Twain to refer to three kinds of lies. Twain incorrectly
attributed the quote to a British Prime Minister, Benjamin Disraeli. Subsequent research found that Leonard
Henry Courtney, a British Baron, first used the phrase. See University of York (UK). “Lies, Damned Lies and
Statistics.” www.york.ac.uk/depts/maths/histstat/lies.htm.
3
John F. Kennedy’s inaugural speech. http://www.cs.umb.edu/jfklibrary/j012061.htm.
4
“Proposal on the xDSL Based Broadband Internet.” http://www.itu.int/ITU-D/pdf/2128-086-en.pdf.
70
Annexes
71
Korea Internet Case Study
72
Annexes
73
Korea Internet Case Study
74
Annex 3: Framework dimensions
Level 0 Non-existent: The Internet does not exist in a viable form in this country. No computers with
international IP connections are located within the country. There may be some Internet users
in the country; however, they obtain a connection via an international telephone call to a
foreign ISP.
Level 1 Embryonic: The ratio of users per capita is on the order of magnitude of less than one in a
thousand (less than 0.1%).
Level 2 Established: The ratio of Internet users per capita is on the order of magnitude of at least one
in a thousand (0.1% or greater).
Level 3 Common: The ratio of Internet users per capita is on the order of magnitude of at least one in
a hundred (1% or greater).
Level 4 Pervasive: The Internet is pervasive. The ratio of Internet users per capita is on the order of
magnitude of at least one in 10 (10% or greater).
Level 0 Non-existent. The Internet does not exist in a viable form in this country. No computers with
international IP connections are located within the country. A country may be using UUCP
connections for email and USEnet.
Level 1 Single location: Internet points-of-presence are confined to one major population centre.
Level 2 Moderately dispersed: Internet points-of-presence are located in at least half of the first-tier
political subdivisions of the country.
Level 3 Highly dispersed: Internet points-of-presence are located in at least three-quarters of the first-
tier political subdivisions of the country.
Level 4 Nationwide: Internet points-of-presence are located in all first-tier political sub-divisions of the
country. Rural dial-up access is publicly and commonly available and leased line connectivity is
available.
Academic - primary >0-10% have leased-line 10-90% have leased-line >90% have leased-line
and secondary schools, Internet connectivity Internet connectivity Internet connectivity
universities
Commercial- >0-10% have Internet 10-90% have Internet >90% have Internet
businesses with > 100 servers servers servers
employees
Health-hospitals and >0-10% have leased-line 10-90% have leased-line >90% have leased-line
clinics Internet connectivity Internet connectivity Internet connectivity
Public-top and second >0-10% have Internet 10-90% have Internet >90% have Internet
tier government servers servers servers
entities
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Korea Internet Case Study
0 Level 0 Non-existent
Level 4 Immense > 100 Gbps > 10 Gbps Many; Both < 90% modem
Bilateral and Open > 64 Kbps leased
lines
Level 1 Single: A single ISP has a monopoly in the Internet service provision market. This ISP is generally
owned or significantly controlled by the government.
Level 2 Controlled: There are only a few ISPs because the market is closely controlled through high
barriers to entry. All ISPs connect to the international Internet through a monopoly
telecommunications service provider. The provision of domestic infrastructure is also a monopoly.
Level 3 Competitive: The Internet market is competitive and there are many ISPs due to low barriers to
market entry. The provision of international links is a monopoly, but the provision of domestic
infrastructure is open to competition, or vice versa.
Level 4 Robust: There is a rich service provision infrastructure. There are many ISPs and low barriers to
market entry. International links and domestic infrastructure are open to competition. There are
collaborative organizations and arrangements such as public exchanges, industry associations, and
emergency response teams.
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Annexes
Level 0 None: The Internet is not used, except by a very small fraction of the population that logs into
foreign services.
Level 1 Minimal: The small user community struggles to employ the Internet in conventional, mainstream
applications.
Level 2 Conventional: The user community changes established practices somewhat in response to or in
order to accommodate the technology, but few established processes are changed dramatically.
The Internet is used as a substitute or straight-forward enhancement for an existing process (e.g.
e-mail vs. post). This is the first level at which we can say that the Internet has "taken hold" in a
country.
Level 3 Transforming: The user community's use of the Internet results in new applications, or significant
changes in existing processes and practices, although these innovations may not necessarily
stretch the boundaries of the technology's capabilities. One strong indicator of business process
re-engineeering to take advantage of the Internet, is that a significant number (over 5%) of Web
sites, both government and business, are interactive.
Level 4 Innovating: The user community is discriminating and highly demanding. The user community is
regularly applying, or seeking to apply the Internet in innovative ways that push the capabilities of
the technology. The user community plays a significant role in driving the state-of-the-art and has
a mutually beneficial and synergistic relationship with developers.
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